Drug Price Transparency: Drivers at the Point of Prescribing

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By Tony Schueth, CEO and Managing Partner

Drug Price TransparencyThe high cost of prescription drugs is a pain point for payers, prescribers and patients alike. Patients often experience sticker shock when they go to pick up their prescriptions. The answer is price transparency at the point of prescribing, which is underlain by a complex array of drivers for change. These include:       

  • Medication nonadherence. Nonadherence to medication regimens is a serious problem, which is expensive for the American healthcare system and has implications for the quality and safety of patient care. The problem is caused, in part, by patients’ out-of-pock (OOP) costs. The Kaiser Family Foundation found that one in four people taking prescription drugs report difficulty affording their medication. According to research from CoverMyMeds, 75% of patients report they have received a prescription that cost more than they expected, half did not fill a prescription because it cost too much when they arrived at the pharmacy, and more than a third stopped taking a medication because it was too expensive. About half of the 3.2 billion prescriptions dispensed annually in the United States are not taken as prescribed. Such medication nonadherence in turn creates unnecessary doctor visits, hospitalizations and deaths, which are estimated to cost the healthcare system between $100 and $300 million annually.
  • Insurance coverage gaps. The insurance industry is changing and, with it, the way medications are covered. Unfortunately, this change may lead to higher OOP prescription costs for consumers. High-deductible health plans are becoming the norm, which may put needed drugs out of reach until the deductible is met or because of minimal coverage for medications. A growing number of health plans offer percentage-based copays and use of specialty tiers with coinsurance (percentage vs fixed copayment). This results in increasingly large OOP portions being paid by consumers. Cancer therapy is a pricey example. Although Medicare pays for the bulk of cancer care in the United States and covers a high percentage of the cost, copays for patients can easily reach $10,000 a year or more.
  • Information gaps. Prescribers frequently lack all the necessary insurance information needed to make an informed decision regarding affordable, effective therapeutic options for their patients. This is a significant challenge because of gaps in the data and when and how it is provided. Typically, cash prices are not displayed in electronic health records, and prescribers are not informed about the availability of consumer assistance programs.
  • Personal responsibility. Consumers are increasingly being asked to bear the costs of medications. The changes in insurance discussed above have increased patients’ OOP costs 10-fold. At the same time, consumers frequently lack a basic understanding of how their insurance works and what it covers, especially when it comes to medications.
  • Rising costs of specialty medications. Specialty pharmaceuticals are high-cost, complex drugs with special handling and administration requirements. Generic alternatives and lower cost biosimilars usually aren’t yet available. Specialty medications are primarily used to treat rare or chronic conditions and half of American adults have one. On a practical level, the costs of specialty medications can lead to a huge financial burden for consumers. According to one study, the average cost of treatment with a single specialty medication was $52,486 in 2015. This is three times higher than the average Social Security retirement benefit ($16,101) and twice the income for a Medicare beneficiary ($25,150).
  • The move toward value-based care. Many public and private insurers are moving toward reimbursement based on lower costs and improved patient outcomes. Medication non-adherence increasingly is becoming recognized as big problem that can be avoided. As a result, payers are creating incentives to reduce medication nonadherence and improve patient communications. Providers may be measured—and reimbursed—on results.
  • Policy changes related to pricing. Federal and state governments are concerned that drug manufacturers are launching products with high prices and routinely raising the prices of existing drugs, often by amounts that hit the national news. For example, Luxturna, a newly released cure for a rare form of blindness, runs $850,000. This has gotten the attention of public officials. States increasingly are passing drug transparency laws. At the federal level, addressing the high cost of drugs and consumers’ OOP are administration priorities. To that end, a blueprint for change has been created and a former CVS Caremark executive, Daniel Best, has been hired to head the administration’s efforts to reform drug pricing.
  • Availability of technology. Technology increasingly is available to provide some OOP information at the point of care. Two complementary and needed transactions have been created: electronic prior authorization (ePA) and the real-time benefit check (RTBC). ePA helps providers know upfront whether the medication they want to prescribe requires PA, which could reduce speed to therapy. The RTBC provides real-time, patient-specific information to providers regarding a patient’s prescription drug benefit coverage as well as OOP costs.

It is clear that drug price transparency at the point of prescribing is a complex problem with many moving pieces. Want to know more? Read the full article in HIT Perspectives and watch for the next blog. It will provide a more in-depth description of the information gaps that hinder price transparency at the point of prescribing. I’d also be happy to discuss this with you. Reach out to me at tonys@pocp.com.